Equitas Small Finance Bank shares extended their sharp decline on Friday, October 30, falling 17% after managing director and chief executive officer PN Vasudevan resigned from his position.
The resignation has brought renewed attention to a perceived conflict-of-interest issue involving a non-banking financial company (NBFC) co-promoted by his daughter.
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The stock hit an intraday low of Rs 47.26 on the BSE. However, it recovered partially and was trading 14.81% lower at Rs 48.55 apiece at 10:35 am. In comparison, the BSE Sensex was trading nearly flat at 74,166.
The sharp correction comes despite Equitas SFB reporting a strong set of Q2 FY27 results, with net profit surging more than ninefold year-on-year to Rs 218 crore.
Why Did Equitas SFB CEO PN Vasudevan Resign?
Equitas Small Finance Bank said on Thursday that its board had taken cognisance of Vasudevan's resignation. He cited his intention to pursue certain personal and social initiatives through which he believes he can contribute further to society.
READ | Equitas SFB MD & CEO PN Vasudevan Resigns, Says Conflict 'Overhang' Allegedly Hurting Stock
However, his resignation letter also addressed questions around a perceived conflict of interest involving an NBFC co-promoted by his daughter.
Vasudevan said he had repeatedly been questioned about the issue, although he maintained that there was no conflict of interest as there were no transactions between Equitas SFB and the NBFC.
He acknowledged one transaction involving a short-term deposit made around two-and-a-half years ago, which was repaid on maturity.
Despite explaining the matter to investors, the perception of a conflict of interest continued to persist, he said. According to Vasudevan, investors had told him that the overhang was contributing to the bank's stock underperformance.
In his resignation letter, he said stepping down was necessary to remove this perception and allow the stock to reflect the bank's financial strength.
The bank has asked Vasudevan to continue in his role until a suitable successor is identified. His resignation will take effect after he hands over responsibilities to the successor.
PN Vasudevan Tells NDTV Profit: 'This Overhang Has Been Impacting The Stock'
Speaking to NDTV Profit, Vasudevan said he had sent a detailed letter to the board explaining the reasons behind his exit. He maintained that the bank was performing well across key metrics and that he continued to foresee a strong future for the lender.
He said the perceived conflict-of-interest issue had remained an overhang for the past few years and that he believed this was the right time to remove it.
Vasudevan also told NDTV Profit that the issue had been affecting the stock and that removing the overhang could help the market better reflect the bank's underlying financial performance.
He clarified that his resignation was not led by any discussions with stakeholders and that there were no regulatory concerns associated with his exit. He also said he did not see the succession process as an overhang on the stock.
Addressing the NBFC issue, Vasudevan said he held no stake in his daughter's company. He also reiterated the bank's focus on serving customers in the informal and semi-formal segments.
Equitas SFB Q2 Results: Net Profit Jumps Over Ninefold To Rs 218 Crore
Equitas Small Finance Bank reported a strong improvement in its September quarter performance, with consolidated net profit rising to Rs 218 crore in Q2 FY27 from Rs 24 crore in the corresponding quarter last year.
Net interest income (NII) increased 32.7% year-on-year to Rs 1,026 crore from Rs 773 crore. Operating profit rose to Rs 402 crore from Rs 241 crore a year earlier.
Asset quality also showed a sequential improvement. Gross non-performing assets (GNPA) stood at 2.29% in Q2 FY27, compared with 2.42% in the previous quarter. Net NPA was marginally lower at 0.70% against 0.71% in Q1 FY27.
Provisions declined to Rs 115 crore from Rs 161 crore in the previous quarter and Rs 207 crore in the year-ago period.
However, the bank's tax expense increased to Rs 69.3 crore from Rs 9.4 crore in Q2 FY26.
Separately, the bank reappointed Anil Sharma as its part-time chairman for a three-year term.
READ | Equitas SFB Q2 Results: Profit Jumps Multifold, Revenue Rises
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